TIDMAMI
RNS Number : 3237P
African Minerals Ltd
15 August 2014
15 August 2014
African Minerals Limited
("African Minerals", "AML", or "the Company")
Funding Update and Management Change
African Minerals Limited, the developer and operator of the
Tonkolili iron ore mine in Sierra Leone, today announces an
injection of liquidity at the project level, and a change of
management.
Key Points
-- Agreement with Shandong Iron and Steel Group ("Shandong"),
AML's Tonkolili project partner, to access $284m of cash held at
the project level, previously earmarked for phase II expansion,
also for working capital purposes, with drawdown to begin
immediately
-- Financial and Operational separation of management of Project Companies from AML
-- Evaluation of shorter term funding requirements for AML as parent company
-- Appointment of Alan Watling as Chief Executive Officer for
both African Minerals and the Project companies
-- Notification by Shandong of further claims against Project
Companies under "Most Favoured Nation" pricing treatment in its
offtake agreements
-- Reiterate guidance of 16-18Mtpa for full year 2014, with C1 cash costs in the range $34-36/t
Roger Liddell, Senior Independent Director, said:
"The first half of 2014 has been an extremely busy period for
African Minerals. Exports remain on track to meet our annual sales
guidance of 16-18Mt with cash costs of $34-36/t which remains
unchanged; the wet season has started aggressively, but we are
pleased to report that production and export sales have been
unaffected, with 9Mt already exported in the first half of the
year.
We have established our DSO strategy, which will see us
commission de-sliming circuits to produce year round shippable
products and to cease producing and selling lower margin A32; most
excitingly, we reported that our expansion into high value
concentrate could be completed at a significantly lower capital
cost and in an accelerated timeframe than previous expectations to
provide substantially increased margins; and we also extended our
DSO resource to provide flexibility to further defer any additional
concentrator requirements.
Despite the good progress at the operations, the last few weeks
have thrown up a perfect storm of low iron ore prices and
heightened concern over the serious Ebola virus disease outbreak
that is afflicting several countries in West Africa, amongst
others. After generating a strong operating margin in Q1 2014, the
second quarter has seen our received FOB price fall, putting
pressure on our working capital requirements, as noted in our
market update on 6 August 2014.However, we are confident that the
establishment of our de-sliming circuits later this quarter will
provide an immediate uplift to our revenue and marked reduction in
cash cost, returning the project to a cashflow positive status,
even in the depressed current iron ore price environment.
We are very pleased to announce that, during a project
shareholders meeting held between 9 and 11 August 2014 in Jinan,
both shareholders have agreed to access the funds in the Hong Kong
joint project account, currently totalling $284m, not only for
construction capital, but also for general working capital
purposes, with immediate effect. A condition of the release of
these funds into the Project Companies is that there is a financial
and operational separation of their activities from AML. In
addition, Shandong has requested certain changes to the management
structure of the project companies, which has been agreed by the
Board of AML.
The Company is pleased to announce that Alan Watling, previously
CEO of the Company during the construction phase of the Tonkolili
project and associated infrastructure, who retired during 2012,
will once more take on the role of CEO of the Project Companies and
of AML. The Board has accepted the resignation of CEO Bernard
Pryor. The Board thanks Bernie Pryor for his services, especially
for the production performance during his tenure, and his
development of the reduced capital cost Phase II strategy.
Shandong has also alerted AML to claims that it has against the
Project Companies in respect of application of the "Most Favoured
Nation" pricing treatment in its offtake agreements. The Company
acknowledges receipt of this claim and is working with Shandong to
agree the appropriate methodology for calculation of the amount,
and the timing and method of payment, if required.
With immediate funding secured, strong project level leadership,
and the anticipated almost immediate benefits of de-sliming, we
expect that the operations will continue to grow to their
potential, and we remain confident of meeting our guidance range
and ending the year with a sustainable 20Mtpa run rate.
The Company continues to evaluate opportunities regarding an
optimum capital structure over the medium to longer term. The new
management will also be reviewing and putting in place an
appropriate longer term structure and funding for AML as the parent
company, separate from the funding needs of the Project Companies.
In addition to reliance on up-streaming of dividends in due course,
this will also involve raising shorter term funding to meet AML's
commitments as they fall due. Whilst this plan is developed the
Company has deferred finalisation of its half year 2014 accounts
which were scheduled for release on 21 August 2014."
Contacts:
African Minerals Limited
+44 20 3435 7600
Mike Jones
Tavistock Communications
+44 20 7920 3150
John West / Jos Simson / Nuala Gallagher
Jefferies
+44 20 7029 8000
Nick Adams / Alex Collins
"The following information in relation to Alan Watling's
appointment is disclosed in accordance with Schedule Two (g) of the
AIM Rules for Companies.
Alan Steven Watling (aged 60) has been a director or partner of
the following companies/partnerships during the five years
preceding the date of this announcement:
Current Directorships Previous Directorships
Pan African Tambao SA (Burkina African Minerals Limited
Faso) African Petroleum Corporation
Limited
Alan Watling currently holds 896,970 shares in the capital of
African Minerals.
There is no further information to be disclosed pursuant to
Schedule Two (g) of the AIM Rules for Companies."
About African Minerals
African Minerals operates the Tonkolili Iron Ore Project (the
"Project") in Sierra Leone, with a JORC compliant resource of 12.8
Bt. The multi-generational Project is being developed in a number
of staged expansions. In 2013, African Minerals completed sales of
12.1 Mt to its customers. The current year sales guidance is for
16-18 Mt of exports as the operations focus on operating at the 20
Mtpa run rate design capacity.
Phase II expansion will see exports increase to 25 Mtpa, and
will incorporate production of a high grade concentrate product.
Concentrate production is expected to begin in 2015 and will
eventually displace current DSO production as concentrate volumes
increase and the DSO resource depletes over time.
The Company has also developed significant port and rail
infrastructure to support the operation of the Project, via its
subsidiary African Rail and Port Services (SL) Limited ("ARPS"), in
which the Government of Sierra Leone ("GoSL") has a 10% free
carried interest.
The Project companies are currently owned 75% by AML, and 25% by
Shandong Iron and Steel Group ("SISG"), except for ARPS, which is
currently owned 75% by AML and 25% by SISG, with the GoSL having
the right to a 10% free carried interest from AML.
www.african-minerals.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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